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Strategic Human Resource Management: How SHRM Supports the Success of HR Functions [Ultimate New Guide of 2024]

Team Kissflow

Updated on 25 Mar 2024 6 min read

Introduction of Strategic Human Resource Management (SHRM)

In today's dynamic and competitive business landscape, organizations recognize that their most valuable asset is their human capital. Strategic Human Resource Management (SHRM) has emerged as a critical approach that aligns HR practices with organizational goals and objectives. By adopting a strategic approach, businesses can effectively leverage their human resources to gain a competitive advantage, drive innovation, and achieve long-term success. This article explores the concept of Strategic Human Resource Management and its significance in enhancing organizational performance.

The purpose of the Human Resources (HR) function has changed enormously during the last fifty years or so. HR was once primarily regarded as a predominantly administrative and record-keeping department. However, the majority of forward-thinking organizations now see their HR team as a key contributor toward business success. This article will take a closer look at what strategic human resource management is and how it can partner with the business for the best results in a competitive market place.

What is Strategic Human Resource Management?

Strategic Human Resource Management refers to the proactive and planned alignment of HR practices with the strategic objectives of an organization. It involves the integration of HR functions, such as recruitment, selection, training, performance management, and compensation, with the overall strategic goals of the business. SHRM focuses on developing a talented workforce, fostering employee engagement, and creating a supportive culture that promotes organizational effectiveness and sustainability.

Before we start breaking down the HR strategy, it is important to define strategic human resource management. A good strategic HR definition is the link between an organization’s vision, objectives, and goals, as well as the activities of one of its core resources—its employees (also known as its human capital). Strategic human resources management (strategic HRM) can have several different purposes or objectives depending on the specific business.

In general, it aims to drive successful business performance by recruiting, developing, and retaining the best talent in the market to give the organization a competitive advantage. The purpose is also to develop and maintain an organizational culture that is progressive and conducive to business needs.

Of course, there are still many transactional aspects involved in the HR function, from dealing with payroll and contracts to compliance and employee relations. Effective strategic resource management aims to work alongside these necessary HR processes to help the business achieve its broader goals.

Key Elements of Strategic Human Resource Management

  • Strategic Workforce Planning: SHRM starts with identifying the future human resource needs of the organization and aligning them with the strategic objectives. It involves assessing current talent, forecasting future requirements, and implementing strategies to bridge the gap.
  • Talent Acquisition and Retention: Effective recruitment and retention strategies are crucial for acquiring and retaining top talent. SHRM emphasizes attracting individuals who possess the required skills, knowledge, and cultural fit. Additionally, it emphasizes creating an engaging work environment that encourages employee loyalty and reduces turnover.
  • Learning and Development: SHRM recognizes the importance of continuous learning and development to enhance employee skills and competencies. It involves providing training opportunities, mentoring programs, and career development plans that align with organizational goals and individual aspirations.
  • Performance Management: SHRM promotes a performance-driven culture by establishing clear performance expectations, providing regular feedback, and aligning individual goals with organizational objectives. It emphasizes fair and transparent performance appraisal systems that link performance outcomes to rewards and recognition.
  • Compensation and Benefits: SHRM ensures that the compensation and benefits structure is aligned with the organization's strategic objectives. It involves designing competitive salary structures, variable pay plans, and benefits packages that motivate employees and reinforce desired behaviors.
  • Employee Engagement and Well-being: SHRM recognizes the significance of employee engagement and well-being in driving organizational success. It involves fostering a positive work environment, promoting work-life balance, and implementing initiatives that enhance employee satisfaction, morale, and productivity.

Benefits of Strategic Human Resource Management

  1. Competitive Advantage: By aligning HR practices with the overall strategy, SHRM enables organizations to differentiate themselves from competitors. It helps in attracting and retaining top talent, enhancing employee performance, and fostering innovation.
  2. Improved Organizational Performance: SHRM ensures that the workforce is equipped with the necessary skills and competencies to achieve strategic goals. It improves productivity, reduces costs, and enhances overall organizational performance.
  3. Enhanced Employee Satisfaction and Engagement: SHRM focuses on creating a work environment where employees feel valued, engaged, and empowered. This leads to higher levels of job satisfaction, increased employee commitment, and improved retention rates.
  4. Adaptability to Change: SHRM enables organizations to respond effectively to internal and external changes. It facilitates agility and flexibility in workforce planning, talent acquisition, and skills development to address evolving business needs.
  5. Sustainable Growth: By aligning HR practices with long-term strategic goals, SHRM contributes to the sustainable growth and success of the organization. It creates a strong employer brand, enhances organizational reputation, and attracts high-quality talent.

How is the concept of SHRM helpful and what are the latest trends?

Strategic HRM and HR goals are not static entities within a business. By their very nature, they must evolve constantly to ensure that they are well connected to the company’s wider strategy. So, you should not only align your current HR trends and best practices to your organization but also make sure it lines up with progressive HR trends.

One of the biggest trends in the last five years has been the concept of talent management—essentially the goal of recruiting and crucially, retaining the best employees in the market. Talent management, therefore, incorporates traditional aspects of HR such as recruitment, onboarding, performance management, and succession. It ensures that employees have the optimum skills and experience to contribute positively to business operations and are well motivated and rewarded to stay with the organization long term.

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What are the 7 steps to acing strategic resource management?

Re-focusing your organization’s HR function to be more strategic can have so many benefits, but it is not something that can be done overnight. Careful strategic HR planning and thorough execution are key to success.

Here are our top seven steps to put in place a strategic HRM process in your business:

1. Understand your organizational strategy and current objectives

To align your HR strategy to the wider business one, you must understand it thoroughly, with a particular focus on the parts of the strategy that HR management has the potential to contribute toward most effectively.

It is crucial that the senior leadership team of the business not only defines the goals and objectives, but also communicates them effectively to the whole business. This way, everybody understands the part they can play in organizational success and can align their own work accordingly.

2. Undertake an analysis of your HR function

The next step is to evaluate the performance of your existing HR team to better understand the capability and skills that you have within, and therefore what opportunities there are to add value in different areas.

There are a ton of ways to carry out this process. Naturally, the performance review process is a great place to start, but you do not have to wait for the scheduled biannual review. Make a start on some effective skills and competency framework assessments with the team to see where strengths and opportunities lie.

3. Match your HR function’s skills to the strategy

The analysis exercise outlined in step two will also help you see where your skills gaps are. It will help you decide whether you need to recruit additional resources into the HR team to help support the strategic human resource management process.

4. Forecast your future HR requirements

Looking at your current HR function capability is important, but this is only a snapshot of the present situation. A vital part of strategic human resource management is looking ahead at the business strategy and planning how HR can support and partner with the business to meet its objectives.

There are two key elements to be considered in this forecasting exercise—supply and demand. Supply relates to the employees that are already in the business and what opportunities exist within their skillset. Demand considers what the requirement might be in the future in terms of desired or necessary HR skills.

5. Evaluate the tools needed by employees for their roles

Once you have determined the skillset of your current and future employees, the next critical step within the strategic HRM process is to work in partnership with each business department to establish the following:

a) the HR tools that provide teams the best opportunities for working effectively and

b) to what extent the organization already utilizes such tools or what investments might need to be made in the future.

This is important because although it is a widely held view that employees’ skills and experience contribute the most toward business success, without the appropriate tools (e.g., IT hardware and software) to perform their roles, they will not realize their full potential.

6. Define your human resources strategic goals and implement them

Now that you have completed the crucial preparatory work, it is time to outline your main HR strategic goals and implement your strategy. A big part of this step of the strategic human resource management process is to begin the recruitment of staff to fill the gaps in personnel that is impacting your organization’s ability to grow and thrive.

It is also crucial to communicate your HR strategy and goals, both within the HR team and across the whole business, so that it becomes fully integrated into everyday business operations.

7. Evaluate the effectiveness of your strategic HR practices

The hard work does not stop at the implementation stage of strategic human resource management. As business needs and priorities constantly change, you must review the effectiveness of your HR strategy and ensure that it is contributing positively toward business success.

Assess the effectiveness of strategic human resource management in your organization

If you are thinking of taking a more strategic focus towards HR, begin by undertaking a robust evaluation of the tasks, activities, priorities, and successes of your HR function. Doing this will establish how strategic each element is and what opportunities exist to better integrate its work to the wider organizational goals.

All-in-one HR tools like Kissflow HR Cloud will help you conduct a clear analysis of your existing HR function and identify HR strategy gaps that you need to work on. Best of all, it will not only help you move from administrative HR to strategic HR but also enable you to form an HR strategy that aligns completely with your organization’s key goals and objectives.

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